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Tuesday's Bonus Article
Carmax at 5-Year Lows: Is Now The Time to Buy?Author: Thomas Hughes. Date Posted: 4/16/2026. 
Key Points
- Carmax stock is poised to plunge following weak guidance.
- Contracting margins and weak demand are undercutting cash flow and capital return.
- A convergence of factors, including suspended buybacks, suggests new long-term lows are coming.
- Special Report: Elon’s “Hidden” Company
Carmax (NYSE: KMX) shares are trading near five-year lows, presenting an intriguing opportunity. Although the company is insulated from financial collapse, market forces are aligned to keep this stock from rising in the near term. The takeaway from the fiscal Q4 2026 results and forward guidance is that business conditions are suboptimal — so much so that management paused its share buybacks to preserve capital. This is significant because FY2025 buyback activity had previously reduced the share count by a high single-digit percentage.
The Wall Street Journal is already raising the alarm about a potential market crash, and Weiss Ratings research points to the first half of 2026 as a particularly rough stretch for certain holdings.
Some of America's most popular stocks could take serious damage as a radical market shift plays out. Analysts at Weiss Ratings have identified five names you may want to remove from your portfolio before this unfolds.
If any of these are in your portfolio, now is the time to review your positions. See the 5 stocks to avoid
The likely outcome is that Carmax weathers these headwinds and eventually emerges stronger. The question is how long that will take and how low the stock might fall before recovery. Carmax Near Price Floor: Sell-Side Support Isn’t FirmTechnically, the stock is trading near a potential price floor in early Q2 2026, roughly aligned with COVID-19 era lows. The difference from 2020 is that the earlier selloff led to a quick turnaround, while price action in 2026 has languished with little to attract buyers. Analysts who might otherwise establish a floor are unlikely to do so given the guidance update and the deteriorating sentiment trend. 
MarketBeat’s data show a high-conviction Reduce rating based on 18 analysts, and sentiment has been weakening. The 2026 trend includes numerous downgrades and price-target cuts, with consensus valuing the stock near the technical floor and the low end at $28. In that scenario, KMX could easily fall to fresh lows and potentially shed more than 25% before finding a bottom. Short sellers are active in this market. Short interest isn’t extreme at roughly 10%, but it has increased in recent reports and is sufficient to weigh on price action. Short interest could rise further given the pause in buybacks and potential weakness in upcoming reports. The deciding factor will be the institutions. They own a significant 99% of the shares, and their activity is ambiguous. The data show institutional accumulation in early 2026 ahead of the Q1 release, but the trailing 12-month net activity is roughly neutral. Buying and selling are balanced, reflecting a market in limbo and highly sensitive to news. The risk is that weak 2026 guidance and the buyback pause push institutions into distribution, sending the stock through critical support to fresh lows. Short-sellers would likely amplify any such decline, adding momentum and depth to the drop. Carmax Headwinds Build, Impair Outlook for 2026Carmax struggled in its fiscal Q4, with margins declining amid weak demand and pricing pressure. Total unit sales rose 0.7%, driven by a 3% increase in Wholesale but offset by a 0.8% decline in Retail. Comparable units fell nearly 2%. Total retail sales fell by more than 1%, and the guidance left the market feeling cautious. Margin news was also disappointing. Adjusted earnings per share beat MarketBeat’s consensus, but were affected by one-offs and weighed down by weak margin guidance. The adjusted EPS of $0.34 was down more than 40% year over year, even after accounting for the positive impact of earlier share buybacks. Margin contraction is expected to continue. Rising Debt and Margin Impairment Sap Enthusiasm for KMX StockOther concerns include the balance sheet and debt levels. The company is not facing bankruptcy, but 2025 activities reduced cash, increased inventory, and weakened equity, leaving leverage above target levels and further pressure likely in the year ahead. Guidance calls for additional cost savings from turnaround efforts, but these are offset by narrowing margins and lower profitability. Competition and digitization risks are also meaningful. Carmax trails on digital offerings and is struggling to gain share against operators such as Carvana. Carvana’s end-to-end digital process resonates with consumers, enabling easy online car buying. Carmax has similar features but achieves only a low double-digit percentage of its sales fully online. Carvana (NYSE: CVNA), by contrast, sells a larger share of vehicles digitally and benefits from higher margins as a result. Catalysts this year include operational improvements under the new CEO. Keith Barr took over earlier this year and is expected to push operational upgrades and digitization. Market-share gains are possible as smaller used-car dealers consolidate. The question is whether Carmax can capitalize on the opportunity ahead of competitors and do so profitably. Interest-rate trends could also improve consumer demand for pre-owned cars, but the market is currently pricing in a slow pace of rate cuts, with the next reduction not fully priced into futures until sometime in 2027. |
